On Monday (12/30/19), GWR announced the completion of its sale to Brookfield Infrastructure and GIC. Accordingly, we are withdrawing coverage of GWR. As such, our previous GWR research, estimates and rating should no longer be relied upon.
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Pasted below, please find our Friday Freight note. We distribute this product via email each Friday mid-day, so clients have some freight reading material to make their weekends truly worthwhile! Your feedback is always appreciated if you have any suggestions.
Our WR Transport Index was flat last week, underperforming the 1.7% rise in the S&P 500. The Rails (+1.4%) relatively outperformed last week, while the Integrators (-7%) underperformed after another miss & cut from FDX. The TLs (-2%) also underperformed last week but rallied a bit on Friday following KNX’s large downside pre-report.
We spoke with a building products shipper about current demand trends and rail service issues. Our contact saw steady demand in 2019 with total volumes up 2%-3% without the benefit of any major rebuilding efforts following a mild hurricane season. He expects similar growth next year. Rail line-haul service overall is very good with improved train speeds across most rail networks. However, our contact is still seeing some issues with first and last mile service. Meanwhile, our contact experienced 4%-5% rail rate increases on average in 2019 and expects more modest increases of 3%-4% in 2020 given weaker truck pricing and less overall traffic on rail networks. The one exception is NSC which continues to seek higher rate increases than its peers. Lastly, our contact has historically only moved a very small amount of freight via intermodal (roughly 1%) but expects this to grow a percentage point or two in 2020 because of very attractive rates from the IMCs.
Our WR Transport Index rose 1.1% last week, modestly outperforming the 0.7% rise in the S&P 500. Following the trade deal with China, the clear winners last week were those with higher-end China exposure including AAWW (+6% last week), FDX (+6%) and EXPD (+3.5%). UNP (+3%) also outperformed given its higher-end China exposure among the rails, while CSX (+2%) outperformed despite another coal-related downgrade.
We distribute this product via email each Friday mid-day, so clients have some freight reading material to make their weekends truly worthwhile! Your feedback is always appreciated if you have any suggestions.
Our WR Transport Index fell 1.2% last week, underperforming the 0.2% rise in the S&P 500. The LTLs (-4%) were the worst performers last week after muted tonnage updates from SAIA and ODFL and following the disappointing ISM report. Meanwhile, CP (+3%) was a notable outperformer last week. Overall, our WR Transport index is now up 23% YTD, underperforming the 25.5% rise in the S&P 500. Among the transports, the LTLs (+41% YTD) and Rails (+28%) are performing best this year, while the non-asset Forwarders (-2%) and Integrators (+6%) are performing worst.
We spoke with a large retail shipper about truck capacity and pricing trends. Our contact continues to see very loose TL capacity with 98%-99% tender acceptance rates. This summer, this shipper materially lowered his contractual TL rates following big increases in C18 and is benefiting from lower y/y project rates in 4Q. Our contact is also seeing considerably lower y/y spot pricing, but he’s using minimal spot capacity given elevated tender acceptance rates. Looking out to next year, our contact anticipates 1%-2% TL rate increases starting in 2H:20 following big rate reductions in 1H. The shipper also anticipates minimal intermodal rate increases in C20, and he currently anticipates low-to-mid-single-digit LTL contractual rate increases.
Our WR Transport index rose 4.3% last month, slightly better than the broader Industrial sector and outperforming the 3.4% rise in the S&P 500. Quite frankly, we’ve seen no signs of improvement in freight data yet, but amid hopes of a trade deal and a bottom in the ISM index, transports again benefited from a cyclical rally last month, with Utilities as the lone S&P sector posting negative returns in November. The Rails (+5%) were the best performing transport sub-sector last month, while the TLs (-1%) were the worst performing sub-sector in the group.
Our WR Transport Index rose 0.6% last week, modestly underperforming the 1.0% rise in the S&P 500. The LTLs (+1.5%) were the best performing sub-sector last week, while the asset-light Forwarders (down slightly) relatively lagged with both JBHT and HUBG falling last week. We’re now entering the final month of the year and our Transport index is up 25% YTD, basically right in line with the S&P 500. Among the transports, the LTLs (+47% YTD) and Rails (+28%) are performing best this year, while the non-asset Forwarders (flat) and Integrators (+8%) are performing worst.
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